This article provides an in-depth analysis of the case ITA 248/DEL/2019, where the appellant, Paresee Leasing & Finvest Ltd., New Delhi, contested the assessment order issued by the Income Tax Officer (ITO), Ward-19(1), New Delhi, for the assessment year 2015-16. The primary issue was the disallowance of business loss and the addition of undisclosed income.
The appellant, Paresee Leasing & Finvest Ltd., filed an appeal against the order dated 29.10.2018 passed by the Commissioner of Income Tax (Appeals)-7, New Delhi. The assessment year in question was 2015-16, and the appeal was filed on 14.01.2019.
The main contention in the appeal was related to the disallowance of a business loss amounting to Rs. 28,59,109 and an addition of Rs. 1,42,955 as undisclosed income. The disallowance was primarily based on the alleged involvement of the appellant in penny stock transactions deemed to be sham and bogus by the Assessing Officer (AO).
The case was heard on 20.01.2020 by the Delhi ‘SMC’ Bench of the Income Tax Appellate Tribunal (ITAT). The bench comprised Shri H.S. Sidhu, Judicial Member. The appellant was represented by Sh. Rajiv Jain, CA, while the respondent was represented by Sh. Manoj Kumar Chopra, Senior Departmental Representative (DR).
The appellant argued that the disallowance was made without proper consideration of the documentary evidence provided, such as contract notes, broker statements, and Demat account statements. The appellant claimed that these documents sufficiently evidenced the genuineness of the share transactions resulting in the loss.
The respondent, represented by the Senior DR, relied on the findings of the AO and the CIT(A), arguing that the transactions were part of a penny stock scheme designed to create fictitious market gains and losses. The DR also referenced various judicial pronouncements supporting the disallowance.
The tribunal examined the details of the share transactions involving Cressanda Solutions Ltd. and Turbotech Engineering Ltd. The AO had noted that the transactions in Cressanda Solutions Ltd. were suspicious due to the suspension of trading by the Bombay Stock Exchange around the time of the purchases by the appellant.
The tribunal observed that while the AO had relied on circumstantial evidence and investigations by the Income Tax Department and SEBI, the appellant had provided significant documentary evidence supporting the genuineness of the transactions. However, the tribunal noted that the AO did not conduct a specific enquiry into the appellant’s transactions.
In the final judgment, the tribunal partially allowed the appeal. The tribunal directed the AO to re-examine the disallowed business loss related to the transactions in Turbotech Engineering Ltd., providing the appellant an opportunity to substantiate the claim with further evidence. The tribunal affirmed the disallowance related to Cressanda Solutions Ltd. and the associated commission payment, citing insufficient contradictory evidence from the appellant.
This case highlights the importance of thorough documentation and the need for specific enquiries by tax authorities when dealing with alleged sham transactions. It also underscores the tribunal’s role in ensuring that both parties are given a fair opportunity to present and substantiate their claims.
The order was pronounced in the open court on 20th January 2020 by Shri H.S. Sidhu, Judicial Member.
Case Number: ITA 248/DEL/2019
Appellant: Paresee Leasing & Finvest Ltd., New Delhi
Respondent: ITO, Ward-19(1), New Delhi
Assessment Year: 2015-16
Order Type: Final Tribunal Order
Date of Order: 2020-01-20
Date of Pronouncement: 2020-01-20
This case exemplifies the complexities involved in adjudicating alleged sham transactions and the need for detailed evidence and specific enquiries to reach a fair conclusion.
Paresee Leasing & Finvest Ltd. Appeal in ITA 248/DEL/2019: Examination of Share Transaction Loss
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